You are here

Virgin Australia forecasts profit as overseas routes go low-cost

Friday, August 7, 2015 - 13:14

Virgin Australia Holdings Ltd said it would return to profit by next June for the first time in four years, counting on a switch of long-haul routes to its low-cost Tigerair subsidiary to reverse international losses.

PHOTO: BLOOMBERG

[SYDNEY] Virgin Australia Holdings Ltd said it would return to profit by next June for the first time in four years, counting on a switch of long-haul routes to its low-cost Tigerair subsidiary to reverse international losses.

The airline will move several Bali routes from its mainline carrier to Tigerair Australia, the former Tiger Airways Holdings Ltd unit that it took into 100 per cent ownership last October. It also will pull out of flights linking Perth to Phuket and add flights to New Zealand, Fiji and the Solomon Islands, the airline said in a statement to the Australian Stock Exchange.

Chief Executive Officer John Borghetti must restore profits on Virgin's long-haul routes to maintain competitiveness with market leader Qantas Airways Ltd and deliver returns for the carrier's major shareholders, Air New Zealand Ltd, Singapore Airlines Ltd. and Etihad Airways PJSC. The company lost A$94 million in the 12 months ended June, compared to the the median net loss of A$103 million in five analyst estimates compiled by Bloomberg.

"We are on track to report a return to profitability," Mr Borghetti said Friday on a media call in Sydney. Whether the company would start paying dividends is "a question for another day." The carrier will save about A$162 million from its fuel bill next year, Virgin Australia said, with the benefit shaved to A$63 million thanks to the adverse effects of a weaker Australian dollar. Its fuel bill came to A$1.19 billion during the year ended June.

Shares in Brisbane-based Virgin were down 0.6 per cent at 44 Australian cents at 2:43 pm in Sydney. They've gained 4.8 per cent so far this year, compared to a 1.7 per cent improvement in the benchmark S&P/ASX 200 index.